The Economics textbook prescribed for Class 10th Social Science Board Exams has 4 chapters. Questions are asked from all the chapters of the textbook. You can check the important questions from Chapter 3 (Money & Banking) while revising the syllabus for CBSE Board Exam 2020.
Ques 1 Why is money called a medium of exchange?
Ans: Money acts as an intermediate in the exchange process.
Ques 2 Why do banks ask for collateral while giving loans?
Ans: Banks use collateral as a guarantee until the loan is repaid.
Ques 3 Why are formal sources of credit preferred over the informal source of credit? Give three reasons.
Ans: Formal sources of credit preferred over Informal sources of credit because:
- Formal sources have low cost of borrowing
- Higher Income through cheap borrowing
- No exploitation and debt trap.
- Any other relevant point
Ques 4 Why is credit a crucial element in the economic development?
Ans: Credit is a crucial element in economic development of a country because:
- It helps to meet the ongoing expenses of production
- It helps in increasing earnings
- It helps in completing production in time.
Ques 5 Why do we need to expand formal sources of credit in India? Explain.
Ans: Expand formal sources
- To save people from the exploitation of Informal sector
- Formal charge a low interest on loans.
- To save from debt trap.
- It provides cheap and affordable credit.
- RBI also supervises the formal sector credit through various rules and regulations which ensures that banks give loans to small cultivators, small borrowers, etc. and not just to profit making business and traders.
Ques 6 Why do banks and cooperative societies need to lend more? Explain.
Ans: Banks and cooperative societies need to lend more.
- This would lead to higher incomes
- People could borrow cheaply for a variety of needs.
- They could grow crops and set up small-scale industries etc.
- Cheap and affordable credit is crucial for the country’s development v. To save and reduce the dependence on informal sources of credit
- It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.
Ques 7 Why do banks or lenders demand collateral against loans?
Ans: Banks or Lenders demand collateral against loans.
Bank or lenders demand collateral against loans as it is used as a guarantee to a lender until the loan is repaid.
Ques 8 Describe the importance of formal sources of credit in the economic development?
Ans: 1. Formal sources provide cheap credit.
- Credit at affordable rate is available through formal sources.
- Terms and conditions of credit through formal sources are regulated by government.
- Credit from formal source are favourable.
Ques 9 Describe the bad effects of informal sources of credit on borrowers.
Ans: Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan. In certain cases, the high interest rate for borrowing can mean that the amount to be repaid is greater than the income of the borrower. This could lead to increasing debt and debt trap.
Ques 10 Why is cheap and affordable credit important for the country’s development ? Explain any three reasons.
Ans: Importance of cheap and affordable credit for the country’s development-
(i) Cheap and affordable credits would lead to higher income.
(ii) Many people could borrow for a variety of needs
(iii) It encourages people to invest in agriculture, do business and set up small scale industries etc.
(iv) It enables more investment which will lead to acceleration of economic activities.
(v) Affordable credit would also end the cycle of debt trap.